Royal Mail must not be “fattened up” for a sale in ways that could damage competition in themarket, according to other mail and parcel companies operating in the UK.
Nick Wells, UK CEO of TNT Post, said competition in the UK postal market was still only in itsinfancy, and needed to be carefully nurtured – with a fair regulatory regime – even though thegovernment may have an interest in making state-owned Royal Mail attractive to investors.
“We are only six years into a liberalised market, and so we are still fairly embryonic, andbecause of the dominant power of Royal Mail, competitors will need protection in the access regimefor some time,” he told this week’s ‘The Future of UK Postal Services’ conference. “And after thematurity and development of the market in several years’ time, and fully effective end-to-endcompetition, then you can loosen the regulatory framework.”
UK Mail’s sales and marketing director, Steve Patrick, said: “Even Royal Mail has admitted thatcompetition is good. But with Royal Mail being readied for privatisation, we must not do things inthe short term that would tilt the playing field, and must ensure that regulation should not beshaped to favour Royal Mail.”
Wells added: “Yes, we have to make sure Royal Mail is not fattened up in preparation forprivatisation, and that regulation is not designed with that in mind, by tipping the balance infavour of Royal Mail.”
The points were noted by regulator Postcomm, whose CEO, Tim Brown, responded: “Royal Mail doesstill have 99% of mail deliveries and 86% of single piece mail, and nearly 50% of the bulk mailmarket, so we do still need to regulate in these areas.”
Both Wells and Patrick questioned Royal Mail’s claim that it was now making a loss of 2.5p onevery piece of ‘access’ mail that it delivers on behalf of competitors such as UK Mail and TNTPost. As a result, Royal Mail has requested permission to apply further increases to its accessmail prices of up to 15%.
The competitors claimed that Royal Mail was either being inefficient, or may have reallocatedsome costs in order to change the apparent figures for those operations.
Patrick told CEP-Research: “When the pricing for this was put in place six years ago, Royal Mailwas making 6-8% profit on its access mail, whereas now it claims to be making a loss of 2.5p peritem. One of the problems with this is a lack of transparency.”
Brown said Postcomm did accept that Royal Mail was now making a loss on its access mail,although he declined to say at what level. But he said any decision to allow Royal Mail to increaseprices on access mail were contingent on it providing clear and transparent figures on itscosts.
